Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno announced that July inflation could be a low of 2.2 percent versus June’s 2.5 percent, or come up to a high of three percent.
With a forecast range of 2.2 percent to three percent, the BSP Department of Economic Research said upward price pressures in July will come from higher domestic petroleum and rice prices. “These increases are partly offset by slightly lower electricity rates in Meralco-serviced areas and the continued appreciation of the peso,” it added.
As of end-June, inflation averaged at 2.5 percent. “Monthly inflation has been on a decline since the start of 2020 — from 2.9 percent in January to 2.5 percent in June. Year-on- year food inflation decelerated while non-food inflation also declined due in part to lower domestic petroleum prices,” said Diokno. For 2020, the central bank has a 2.3 percent inflation forecast.
“The BSP will continue to monitor economic and financial developments to ensure that monetary policy settings remain consistent with the objective of price stability conducive to a balanced and sustained growth of the economy,” he said.
During the BSP’s regular “GBED Talks” online press chat on Thursday, Diokno reiterated that “the worst is over” after a second quarter lowest point economic performance.
“I foresee a hockey stick-like recovery (and) I’ve said that we’ve seen the worst and that’s the second quarter. I think the third quarter will be better than the second quarter and the fourth quarter will be much, much better than the third quarter,” he said. “So, we will probably have a very nice Christmas.”
The government expects a GDP contraction of 3.4 percent to two percent for 2020 and an economic rebound in 2021 of eight to nine percent, and in 2022 of six to seven percent.
The BSP’s survey of inflation expectations of private sector economists as of June 2020 showed lower mean inflation forecasts compared to the previous survey which was March this year.
Based on the latest survey, which included 25 economists and analysts, the mean inflation forecast for 2020 declined from 2.9 percent (March) to 2.3 percent. For 2021, the forecasts also decreased from three percent to 2.9 percent. The estimate is also the same for 2022 or 2.9 percent.
“Analysts expect 2020 inflation to be at the lower end of the target range, with risks to the outlook leaning towards the upside with the anticipated recovery following the relaxation of quarantine measures. Nevertheless, a key downside risk to the analysts’ inflation outlook is the subdued domestic demand given high unemployment resulting from the closure of businesses,” said the BSP.